1972 (9) TMI 11 - SC - Income Tax

Department as well as the Tribunal had arbitrarily rejected the explanation given by the assessee. Under these circumstances we do not think that we will be justified in going into the niceties of the law, whether the High Court was justified in going into the merits of the findings reached by the Tribunal. All that we need say is that this is not a fit and proper case where we should exercise our discretionary jurisdiction

Summary

Issues:
- Interpretation of section 66(2) of the Indian Income-tax Act, 1922
- Validity of addition of income from undisclosed sources during assessment year 1951-52
- Jurisdiction of the High Court to go into findings of fact

Analysis:
The Supreme Court heard an appeal against the judgment of the High Court of Kerala in a reference under section 66(2) of the Indian Income-tax Act, 1922. The case involved an assessee, a Hindu undivided family, whose income from undisclosed sources was brought under scrutiny during the assessment year 1951-52. The assessee's explanation for the source of funds, including amounts invested in property and a toddy business, was contested by the Income-tax Officer, the Appellate Assistant Commissioner, and the Income-tax Appellate Tribunal. The High Court was asked to determine the validity of adding Rs. 60,813 as the income of the assessee family from undisclosed sources during the relevant accounting year. The High Court ruled in favor of the assessee, prompting an appeal by the Commissioner of Income-tax, Kerala.

The High Court examined the facts of the case and highlighted the assessee's explanations regarding the source of funds, which were not adequately considered by the lower authorities. The Income-tax Officer and the Tribunal rejected the explanations without proper examination, leading the High Court to question the arbitrary rejection of the assessee's claims. The High Court found that the department authorities and the Tribunal had not sufficiently evaluated the explanations provided by the assessee, which were not prima facie absurd and warranted further investigation. The High Court concluded that the case did not merit interference based on discretionary jurisdiction under article 136 of the Constitution.

The Supreme Court considered the questions raised by the department's counsel, focusing on the jurisdiction of the High Court to delve into findings of fact and the correct application of legal principles. However, the Court determined that the arbitrary rejection of the assessee's explanations by the department authorities and the Tribunal rendered the case unsuitable for further legal scrutiny. Consequently, the appeal was dismissed, upholding the High Court's decision in favor of the assessee.